The National Association of Realtors hailed a new rule proposed by federal regulators that would make mortgage standards less restrictive. The proposed revisions to the Qualified Residential Mortgage rule announced on Aug. 28 will help millions of people buy homes and strengthen the mortgage market, according to the national group.
The new plan eliminates much stricter down payment rules that the previous version of QRM would have created. The plan aligns QRM with the Consumer Financial Protection Bureau’s qualified mortgage rule, which requires borrowers provide income documentation that they can repay the loan, and that their debt-to-income ratio does not exceed 43 percent, among other requirements. It does not require that lenders ask for a set down payment amount. The new rules would not apply to Fannie Mae and Freddie Mac for as long as they remain under federal control.
Under the first QRM rule proposed in April 2011, lenders would have required a 20 percent down payment from borrowers. The national group and other housing advocates, including the mortgage industry, were the most vocal opponents, noting the steep down payment requirement would shut out many qualified and responsible low- to middle-income borrowers from acquiring low-cost and safe mortgages.
The new proposal is “a victory for homebuyers and the future of home ownership in this country,” said association president Gary Thomas. “We applaud the regulators for removing the 20 percent down payment requirement and for adopting reasonable credit and debt-to-income standards.”
The proposal, however, includes a second approach that requires a 30 percent down payment in order for borrowers to qualify for a QRM loan. NAR opposes this alternative, which is described by Thomas as “a restrictive measure that dramatically favors the wealthy.”
“Research shows that it would take the average American more than 25 years to save enough money to buy a modest home with a 30 percent down payment,” added Thomas.
Carolyn Miller, president of the Silicon Valley Association of Realtors, said her organization will continue to oppose any regulation that requires unreasonably high down payments from consumers.
“In high cost areas like California, a high down payment requirement would price many buyers out of the marketplace. In the current market environment, because of the stiff competition among buyers, many are putting 20 to 30 percent down, but to make it a requirement would be unreasonable and disqualify many creditworthy borrowers,” said Miller.
Information in this column is presented by the Silicon Valley Association of Realtors at silvar.org. Send questions to rmeily@silvar.org.
